Best ELSS Mutual Funds in India (2026)
ELSS (Equity Linked Savings Scheme) mutual funds are tax-saving equity mutual funds that qualify for deduction under Section 80C of the Income Tax Act. Investors can claim a tax deduction of up to ₹1.5 lakh per year under the old tax regime.
ELSS funds invest primarily in equities and have a mandatory 3-year lock-in period, the shortest among all Section 80C tax-saving instruments.
Top 10 Best ELSS Mutual Funds in India Based on Returns, Ranks & AUM
What Are ELSS Mutual Funds and How Do They Work?
ELSS mutual funds are diversified equity mutual funds designed to provide tax benefits along with long-term capital growth.
As per regulations from the Securities and Exchange Board of India, ELSS funds must invest at least 80% of their portfolio in equity and equity-related instruments.
ELSS investments qualify for tax deduction under Section 80C of the Income Tax Act, subject to a maximum deduction of ₹1.5 lakh per year.
However, this deduction is available only under the old tax regime. Under the new tax regime, ELSS investments do not provide any tax deduction and are treated like regular equity mutual funds.
ELSS funds come with a mandatory 3-year lock-in period, meaning investors cannot redeem their units before this period ends.
Returns from ELSS funds are market-linked and not guaranteed.
SEBI's Classification Rules for ELSS Mutual Funds
Under the mutual fund categorisation framework defined by the Securities and Exchange Board of India, ELSS funds are classified as a distinct category of equity mutual funds.
Key regulatory rules include:
Minimum equity allocation: At least 80% of the portfolio must be invested in equity and equity-related instruments.
Mandatory lock-in period: Each investment in an ELSS fund is subject to a 3-year lock-in period.
One scheme per category: Each asset management company (AMC) can offer only one ELSS scheme.
Tax deduction eligibility: Investments qualify for deduction under Section 80C of the Income Tax Act, up to ₹1.5 lakh per year under the old tax regime.
These rules ensure that ELSS funds maintain their focus on equity investing combined with tax-saving benefits.
How Do ELSS Mutual Funds Generate Returns?
ELSS funds generate returns primarily through equity investments.
Returns typically come from:
1. Capital appreciation
When the underlying portfolio of stocks increases in value, the fund’s Net Asset Value (NAV) may rise.
2. Long-term equity participation
Since ELSS funds invest mainly in equities, they participate in the long-term performance of stock markets.
3. Dividends
Dividends received from portfolio companies may either be reinvested in the fund (growth option) or distributed under the IDCW option.
Because ELSS funds are equity investments, their returns depend on market performance and are not fixed or guaranteed.
Who Should Invest in ELSS Mutual Funds?
ELSS mutual funds may be suitable for:
- Investors looking to save tax under Section 80C (under the old tax regime)
- Long-term investors seeking equity exposure with tax benefits
- Investors comfortable with market volatility and equity risk
- Individuals planning investments with a minimum 3-year horizon
They may not be suitable for:
- Investors following the new tax regime, where Section 80C deductions do not apply
- Investors who may need liquidity within three years
- Conservative investors uncomfortable with equity market fluctuations
Benefits of ELSS Mutual Funds
Some key advantages include:
Tax benefits
Investments in ELSS funds qualify for deduction under Section 80C, up to ₹1.5 lakh per year under the old tax regime.
Shortest lock-in among tax-saving options
ELSS funds have a 3-year lock-in period, which is shorter than many other Section 80C instruments such as Public Provident Fund (PPF) or tax-saving fixed deposits.
Equity exposure
Since ELSS funds invest primarily in equities, they offer investors the opportunity to participate in long-term stock market growth.
Risks of ELSS Mutual Funds
Like all equity mutual funds, ELSS funds carry certain risks.
Market risk
Since ELSS funds invest mainly in stocks, their value may fluctuate depending on market movements.
Lock-in risk
Investments cannot be redeemed for three years, even if market conditions change or funds are needed earlier.
Fund manager risk
Performance depends on the investment decisions made by the fund manager when selecting and allocating stocks.
Investors should consider their financial goals, tax situation, and risk tolerance before investing in ELSS mutual funds.
AUM Growth of Elss Tax Savings Mutual Funds - May 2026
In the past one month, the SBI ELSS Tax Saver Fund Direct Growth has emerged as the leader in net AUM growth, witnessing an impressive addition of ₹49.64 crore. This positions it as one of the top-performing Elss Tax Savings mutual funds in terms of investor interest and fund growth.
Fund | 1M Net Flow | 1M Net Flow % | Action |
|---|---|---|---|
 SBI ELSS Tax Saver Fund Current AUM: 31.09K Cr | +₹49.64 Cr | 0.15% | Invest |
 Parag Parikh ELSS Tax Saver Fund Current AUM: 5.62K Cr | +₹28.56 Cr | 0.50% | Invest |
 Motilal Oswal ELSS Tax Saver Fund Current AUM: 3.97K Cr | +₹14.01 Cr | 0.33% | Invest |
 WhiteOak Capital ELSS Tax Saver Fund Current AUM: 402.93 Cr | +₹8.74 Cr | 2.00% | Invest |
 Zerodha ELSS Tax Saver Nifty LargeMidcap 250 Index Fund Current AUM: 234.68 Cr | +₹6.6 Cr | 2.64% | Invest |
Top Stock added by Elss Tax Savings Mutual Funds - May 2026
Over the last month, Bharti Airtel Ltd has been added to the portfolios of 11 out of 40 Elss Tax Savings mutual funds. This signals growing confidence in the stock’s long-term growth prospects among Elss Tax Savings fund managers.
Fund | 1M Net Flow | Action |
|---|---|---|
 Nippon India ELSS Tax Saver Fund Added new position | +₹408.17 Cr | Invest |
 Tata ELSS Fund Added new position | +₹254.25 Cr | Invest |
 Axis ELSS Tax Saver Fund Increased shares by 7.61% | +₹93.7 Cr | Invest |
 HDFC ELSS TaxSaver Fund Increased shares by 11.42% | +₹72.95 Cr | Invest |
 DSP ELSS Tax Saver Fund Increased shares by 11.08% | +₹55.97 Cr | Invest |
Top Stock sold by Elss Tax Savings Mutual Funds - May 2026
In contrast, Bharti Airtel Ltd (Partly Paid Rs.1.25) has been sold by 6 of 40 Elss Tax Savings mutual funds in the last one month. This shift underscores a cautious approach by fund managers toward the stock, reflecting changing market dynamics.
Sector allocation of Elss Tax Savings mutual funds - May 2026
Over the last 6 months, and allocation in Tech, Communication, Consumer Defensive sectors has decreased
Sector | AUM |
|---|---|
 Financial Services Decreased by 7.65%, in last 6M | 76.48K Cr |
 Consumer Cyclical Decreased by 14.24%, in last 6M | 29.97K Cr |
 Industrial Decreased by 6.56%, in last 6M | 22.91K Cr |
 Health Decreased by 15.76%, in last 6M | 17.65K Cr |
 Basic Materials Decreased by 9.13%, in last 6M | 16.24K Cr |
 Tech Decreased by 23.23%, in last 6M | 15.49K Cr |
 Energy Decreased by 6.53%, in last 6M | 12.72K Cr |
 Consumer Defensive Decreased by 17.72%, in last 6M | 10.75K Cr |
 Utilities Decreased by 3.77%, in last 6M | 10.16K Cr |
 Communication Decreased by 18.98%, in last 6M | 8.7K Cr |
 Real Estate Decreased by 9.45%, in last 6M | 2.94K Cr |
Frequently Asked Questions
No, ELSS mutual funds come with a mandatory lock-in of 3 years. Unlike FD or other tax-saving schemes that allow withdrawal before maturity with a penalty, ELSS funds do not permit the same. Investors can only redeem their investments after the lock-in period.
You can pause or stop your SIP in ELSS funds at any point in time. However, the funds invested cannot be withdrawn before the lock-in period expires.
Yes, ELSS can be considered a good starting point for beginners who want to explore equity investing. These investors not only enjoy tax-saving benefits but investing in ELSS also ensures they instill consistent investment habits due to the lock-in period.
You can save up to ₹46,800 per year by investing in ELSS funds.
No, all ELSS funds do not perform the same. They have different asset allocations, hence investors need to carefully analyse key metrics before drawing a conclusion of investing in a particular fund.
Yes, ELSS funds can be part of your long-term investment strategy.
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